LS-Nikko Copper to sell $670 million JV stake to Korean PEFs

LS-Nikko Copper Co., the world’s second-largest electrolytic copper maker, is set to sell an 800 billion won ($670 million) stake in a joint venture with a Japanese company to two South Korean private equity firms.

According to investment banking sources on Sunday, the Korean PEFs – JKL Partners Inc. and VL Investment Co. – will jointly acquire a 49.9% stake in LS-Nikko Copper owned by Japan Korea Joint Smelting (JKJS).

The remaining 50.1% of the copper smelter is owned by LS Corp., the holding company of Korea’s LS Group.

The two sides are in the final stage of talks and once the deal is completed, the two Korean PEFs will become new copper smelting business partners for LS Group, Korea’s 14th-largest conglomerate in terms of assets.

JKL Partners will finance about 70% of the acquisition, while VL Investment will pay the remainder, the sources said.

The enterprise value of LS-Nikko, the only copper smelter in Korea, is estimated at more than 1 trillion won, according to industry watchers.

PEFs’ INVESTMENT TARGETS

Founded in 2001, JKL Partners is a Seoul-based investment fund that specializes in equity investments in companies in the consumer products and services as well as the materials and resources sectors.

The midsize PEF, with about 2.5 trillion won in assets under management, began drawing attention in the M&A market when it made a 500 billion won in equity investment in Lotte Non-Life Insurance Co. in 2019 and restructured the insurer into a well-performing entity.

Following the launch of a 900 billion won blind pool fund in 2021, JKL Partners has been investing in a number of local companies.

In March of last year, the PEF invested 80 billion won in T’way Air Co. to become the Korean budget airline’s second-largest shareholder.

In August, the fund acquired Korea's largest laundry service provider Cleantopia Co. for about 190 billion won.

VL Investment, established in 2015, specializes in investments in the clean technology sector, including waste management companies.

Last year, the PEF participated in bidding for KG Eco Technology Service Co.’s environmental energy and new materials business, up for sale.

END TO TIE-UP WITH JAPANESE PARTNER

For LS Group, the sale of the LS-Nikko’s stake in the JV means an end to its 23-year-long partnership with JX Nippon Mining & Metals Corp., the Japanese partner in JKJS.

LS-Nikko Copper was established as a JV between Korea’s LS Metal, formerly known as LG Metal, and JX Nippon Mining & Metals in 1999.

JX Nippon’s sale of its stake in LS-Nikko is part of its business portfolio readjustments aimed at selling minority stakes in JVs with foreign partners.

With the two Korean financial investors, JKL Partners and VL Investment, onboard, LS Group is expected to actively pursue new business opportunities at the copper smelter.

LS-Nikko has been suffering from falling copper refining margins on intensifying competition with Chinese producers.

Amid the growing competition, however, the company posted a record consolidated revenue of slightly over 10 trillion won last year. Its 2021 operating profit was 356.7 billion won.

The company said in September of last year that it is spending 50 billion won by 2024 on a smart factory project at its Onsan plant to cut costs by digitalizing and automating the whole process from raw material warehousing to product shipments.

In a top management reshuffle, Koo Ja-eun, chairman of LS Mtron Co., a machinery and components maker, in November was named to lead LS Group from the start of 2022.

Write to Chae-Yeon Kim and Jung-hwan Hwang at Why29@hankyung.com
In-Soo Nam edited this article.